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William Byrnes (Texas A&M) tax & compliance articles

Posts Tagged ‘Federal Insurance Contributions Act tax’

Group-Term Life Policy Tax Consequences

Posted by William Byrnes on February 25, 2011

The Internal Revenue Code provides an exclusion from income for the first $50,000 of group-term life insurance coverage provided under a policy carried directly or indirectly by an employer. [1] Thus, there are no tax consequences to the individual if the total amount of such policies does not exceed $50,000.  However, the imputed cost of coverage in excess of $50,000 must be included in income to the individual, using the IRS Premium Table[2] and are subject to social security and Medicare taxes.

A taxable fringe benefit arises if coverage exceeds $50,000 and the policy is considered carried directly or indirectly by the employer. A policy is considered carried directly or indirectly by the employer if:

  1. The employer pays any cost of the life insurance, or
  2. The employer arranges for the premium payments and the premiums paid by at least one employee subsidize those paid by at least one other employee (known as the “straddle” rule).

A policy that is not considered carried directly or indirectly by the employer has no tax consequences to the employee.  Also, because the employees are paying the cost and the employer is not redistributing the cost of the premiums through an insurance system, the employer has no reporting requirements.

Read the analysis at AdvisorFYI


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Congress Extends Wage Credit for Employees Who Are Active Duty Members of the Military

Posted by William Byrnes on February 10, 2011

A member of the U.S. military who takes a leave of absence from his private sector job in order to go on active duty will often face a pay cut—the differential between his military and private sector pay.   Some employers make up this differential by paying employees who are on active duty a partial salary.  Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of the Tax Relief Act of 2010 in Advisor�s Journal, see Obama Tax Compromise Provides 100 Percent Bonus Depreciation of Business Assets Through 2011 (CC 11-01)Obama’s Social Security Tax Holiday: Penny Wise and Pound Foolish? (CC 10-119)Does the New Estate Tax Make the Bypass Trust Obsolete? (CC-10-122), and 2010 Estates: To Elect or Not to Elect (CC 10-124).


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Obama’s Christmas Gift to the American Public: Social Security Tax Reduction

Posted by William Byrnes on December 24, 2010

Section 601 of The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (HR. 4853) provides for employee tax and self-employment tax rate reductions.

The Social Security tax is divided by the employee and employer share. [1] For self-employed individuals, a separate but comparable tax applies to covered wages.  [2]

For employees, generally, the term covered wages in this context means, all remuneration for employment, including the cash value of all remuneration (including benefits) paid in any medium other than cash. [3]

Social Security is generally taxed at 6.20% and Medicare (Hospital Insurance) 1.45%. [4] Social Security taxes are composed of (1) the old age & survivors insurance (5.30%) and (2) disability insurance (0.90%) (together known as “OASDI”) tax equal to 6.2 percent of covered wages up to the taxable wage base ($106,800 in 2010 and again in 2011); and (2) the Medicare hospital insurance (“HI”) tax amount equal to 1.45 percent of covered wages. [5]

See the full article at AdvisorFYI


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